SCO 3056 exam 1
What is a benefit of monitoring the input and output of the configuration management system?
-Monitoring the input and output of the configuration management system can disclose product opportunities and provide insights for managing the priorities for producing product modules and options
Days of supply formula
Actual inventory t / sales per day t-1
Long term MPC
Capacity and capabilities
Cash to cash cycle time formula
Cash to cash cycle time = Inventory days of supply + days of sales outstanding - average payment period for the material
Short term MPC
Detailed scheduling of resources to meet production requirements
Master Production Scheduling
Details what is to be produced and when
MPC System Activities: Engine
Encompasses the set of MPC systems for detailed material and capacity planning MRP Materials resource planning
The MPC System Defined
Essential task is to manage efficiently the flow of material, manage the utilization of people and equipment, and to respond to customer requirements MPC provides information to make decisions... it does not make them
multiplicative season variation
Forecast including trend and seasonal = trend x seasonal factor
additive season variation
Forecasting including trend and seasonal = trend + seasonal
Order entry system
a type of transaction system that records and manages order processing
Cd
average daily cost of sales
Sd and s
average daily sales sales over 'd' days
Id and I
average days of inventory total current inventory
What is the advantage of CRM for manufacturing in general?
captures individual customer data for consumer product companies that establish supply chain relationships over the internet
How ERP connects to functional units: finance
common platform for financial data capture and a common set of numbers to reconcile the general ledger
Actual demands ____ the planned materials and capacities
consume
What is the primary day to day function of demand management?
converting specific day-to-day customer orders into detailed MPC actions
Primary demand management task of MTO
coordinate information on customers' product needs with engineering
Casual relationship
when one variable changes because of the change in another variable
Customer order decoupling point: ATO
work in progress
Engineer to order
works with the customer to design the product, then make it from purchased materials, parts, and components.
CS
% cost of sales
How does demand management relate to MPS?
-As customer orders are received and entered into the MPS, the detailed order information must be provided to the master production scheduler as the orders occur -Demand management needs information on the status of orders, capacity consumed, and capacity available so customers can be kept informed
Forecasting for Master Production Scheduling and Control
-Demand management supports decisions made in the MPS module by providing detailed forecasts on a continuous basis -The result of the MPS decision is a statement of how many finished product or component to make and when to do so -Control decisions are also made constantly to keep the product moving to the customer -To produce these detailed forecasts, it is common to use mechanical procedures that can be incorporated into the demand management software
MPC System Activities: front end
-Demand mgmt: Forecasting customer end- product demand, spare parts requirements -Sales and Operations: Balances sales and marketing plans with available production resources
What does demand management do?
-Feeds the SIOP (planning) and MPS (control) modules -Provides forecasts (not plans) Independent (external) and dependent (internal) demand -All sources of demand: for finished product (largest demand), components, spare parts, distributions, inventory changes, demos, promotions, ect
Forecasting for Sales and Operations Planning
-Forecasts ultimately provide the basis for plans that are usually stated in terms of planned sales and output of product families in dollars or some other aggregate measure -The forecasts must also be aggregated to the product family level and cover the same number of periods -Important input: information on customer plans and current demand -Sum the forecasts for the individual products in each product line, then adjust the totals by incorporating info about the customer or demand
ERP
-From managers view point the focus is on the word planning: ERP represents a comprehensive software approach to support decisions concurrent with planning and controlling the business -For IT ERP means software Supports integrated execution
What does Demand management in the MPC systems entail?
-Gather info from and about the market doing things like forecasting customer demand, entering orders, and determining specific product requirements -Communicate with customers by promising delivery dates, confirming order status, and communicating changes
Cash to cash cycle time
-Integrates the purchasing, manufacturing and sales/distribution cycles -Indicates where it comes from (Source), where cash is spent (in use) and the net change -The overall result is the number of days between paying for raw materials and getting paid for the product
Organizing for demand management
-Organizational responsibility for demand management tends to be a function of the organization's history and nature: responsibility must be clearly assigned so nothing's left to chance -A useful technique for defining and managing these areas of responsibility is to require higher and higher levels of approval the nearer to the current date that a change is requested, to take the informal bargaining out of the system
How are physical distribution activities planned?
-Physical distribution activities are planned on the basis of the information developed in the demand management function -Info from demand management is used to develop short-term transportation schedules and specific timing for resupply shipments can be integrated with distribution planning -This info can be used to schedule resources at the warehouse and provide for the delivery capacity needed
Forecasting for Strategic Business Planning
-Related to measures of capacity that may be required to meet future demands -Substantial managerial judgment is required in preparing and reviewing these forecasts since the risk from making an investment can be very large -Casual models and statistical tools of regression and correlation analysis can be used to augment the managerial insight and judgment needed for making these forecasts
What is linear regression analysis used for?
-Useful for long-term forecasting of major occurrences and aggregate planning -Used for both time series forecasting and for causal relationship
SBP forecasting: forecast frequency and length
-annual or less -years by years or quarters
Key concerns of MTS environments
-balance the level of inventory against the level of service to the customers -having items in stock for customer service -physical distribution
What is the advantage of CRM for MTS and ATO?
-capturing info at this level of detail can help to discern early demand and mix trends, provide the basis for new products and services, and lead to the development of knowledge-gaining activities that improve efficiency along the supply chain -CRM can be a useful means for developing insights into the customers that can be used to develop make-to-knowledge plans on an individual customer basis and provide early warning of shifts in design and mix preferences
Performance Metrics to Evaluate integrated system effectiveness
-cost -cash to cash cycle time
ATO capabilities for success
-engineering design that enables as much flexibility in combining components, options, and modules into finished products as possible -Customers need to be informed of allowable combinations, and the combinations should support marketplace desires, customer's orders must be configured, and the customer must be informed of the delivery date of the finished product
What does an effective demand management module do?
-gather marketing information -generate forecast information -screen and monitor performance information -provide detailed action instructions to the material planning and control systems
Sales and operations planning's relation to demand management
-sales and operations planning will provide coordinated sales and operations plans -- for these plans to be comprehensive, all sources of demand must be accounted for in quantity and timing -Internal and external timing issues that affect the plan must be communicated
Decoupling / order penetration point
-the locations in the product structure or distribution network where inventory is placed to create independence between processes or entities. -Strategic: Selection of decoupling points is a strategic decision that determines customer lead times and inventory investment.
PAB formula
= prior period PAB + MPS - greater of customer orders or forecast
How ERP connects to functional units: Sales and marketing
Customer management, forecasting management, order management credit checking configuration management
MPC System Activities: Back End
Depicts execution systems
Inventory plan formula
Inventory plan t+1 = inventory plan t + operations plan t+1 - forecast t+1
Major restriction of linear regression analysis
Major restriction: past data and future projections are assumed to fall about a short line
Management of the MTS supply chain requires what?
Management of this supply chain requires information on the status of inventory in the various locations, relationships with transportation providers, and estimates of the consumers' demands by location and item
Medium term MPC
Matching supply and demand in terms of volume and product mix
Demand management: detailed product mix
Monitoring the product mix for master production scheduling and customer order promising: the intent is to quickly determine changes in customer preferences for adjusting manufacturing and providing delivery information
How ERP connects to functional units: Manufacturing and logistics
Most complex and largest of the module categories
Advantage of order penetration point at raw materials or suppliers
Moving the customer order penetration point to raw materials or even suppliers puts independent demand information further into the firm and reduces the scope of dependent demand information
Software Imperatives: 4 aspects of ERP software that determine quality
Multifunctional in scope: Track financials, procurement in units, sales in units or services Integrated software: Must be integrated in salesforce/other apps Modular: Combined into a single expansive system narrowly focusing on a single function Facilitate classic MPC activities: Forecasting, planning, inventory mgmt
Primary demand management task of ATO
Primary task of demand management is to define the customer's order in terms of alternative components and options, configuration management -Independent demand for the assembled items is transformed into dependent demand for the parts required to produce the components needed -- the inventory that defined customer service is the inventory of components, not the inventory of finished goods
Typical components of ERP
Sales and operations planning Materials management Plant maintenance Quality management Production planning and control Project management
Most important metric for MTS
Service level is the most Important metric, replen lead time is
EDI: Electronic data interchange
The computer-to-computer exchange of business documents from a retailer to a vendor and back
Demand management: Overall market data
The data most appropriate for sales and operations planning is overall market trends and patterns for the product families -- the intent is to determine on an ongoing basis any changes in the general level of actual business for input to the sales and operations planning process
Forecast v plans
The difference between the pattern of demand and the response by the company points out the important distinction between forecasts and plans -Forecasts: of the quantities and timing of customer demand are developed, they are estimates of what might occur in the marketplace -Plan: can look quite different from the forecasts, for example with seasonal products the manufacturing plan may be constant while the forecast fluctuates -Managers are held responsible for plans, not forecasts
Least squares method
The least squares method tries to fit the line to the data that minimizes the sum of the squares of the vertical distance between each data point and its corresponding point on the line
Customer order decoupling point / order penetration point
The point at which demand changes from independent to dependent, the point at which the firm, as opposed to the customer, becomes responsible for determining the timing and quantity of material to be purchased, made, or finished
Linear regression analysis
The special class of regression where the relationship between variables forms a straight line
Routine Decision Making of ERP
Transaction Processing relates to posting and tracking of activities that document the business Primary goal of ERP: The efficient handling of transactions as goods move through each step of the production process Second goal: -Decision support: Which relates to how well the system helps people make intelligent judgements Bolt on: Software packages designed to provide more intelligent decision to support ERP
Postponement
a product design strategy that shifts product differentiation closer to the consumer by postponing identity changes, such as assembly or packaging, to the last possible supply chain location.
Make-to-knowledge
a basic concept of demand management is that there is a pipe of capacity, which is filled in the short run with customer orders and the long run with forecasts, and order entry is a process of consuming the forecast with actual orders
Time series
a chronologically ordered data that may contain one or more components of demand: trend, seasonal, cyclical, autocorrelation, and random when the dependent variable (vertical axis) changes as a result of time (horizontal axis)
Regression
a functional relationship between two or more correlated variables. It is used to predict one variable given the other. The relationship is usually developed from observed data
Demand management in the MPC systems
a gateway module in MPC, providing the link to the marketplace, sister plants, warehouses and other important customers
MTO metrics
capacity -- do we have enough and the right kind
CRM
customer relationship management software, captures individual customer data for consumer product companies that establish supply chain relationships over the internet
Why is data important to demand management?
data must be captured and evaluated to keep the system honest. As a key communication link to the market, it is particularly important to monitor the systems in demand management.
Control
determines how capacity will be converted into products as the orders come in, and how the company will modify the plans in light of forecast errors and other changes in assumptions that inevitably occur
Planning
determining the capacity that will be made available to meet actual future demands for products, much of planning occurs in the sales and operations module
Configuration management
ensuring that alternative components and options can be combined into a viable product
Customer order decoupling point: MTS
finished goods
Assemble to order
firms that combine a number of options to meet a customer's specifications
Make-to-order
firms that make the customer's product from raw materials, parts, and components
Make to stock
firms that serve their customers from finished goods inventory
Most important ATO metric
flexibility targets
Primary task of demand management MTS
focus demand mgmt activities on the maintenance of finished good inventories
Decomposition of a time series
identifying and separating the time series data into these components: additive season variation and multiplicative season variation
Demand management: flexibility
if flexibility is the key objective, management must carefully design and enforce rules for interacting with the system and customers so the system can provide this -- customer order processing must be established and enforced through the communication to the MPS module
Control points
in the theory of constraints, strategic locations in the logical product structure. Detailed scheduling instructions are planned, implemented, and monitored at these locations.
Advantage of order penetration point at components
number of inventory of finished goods is usually much higher than of components
ATP formula
on hand + MPS - sum of orders until next MPS
Benefits of order entry system
opportunity to pick up market intelligence through CRM, cross-sell complementary products, and further customer relationships
Outbound Product Flow
physical distribution
Customer order decoupling point MTO
raw material
Data Warehouse
special program designed to automatically capture and process data for uses that are outside the basic ERP system applications
seasonal factor
the amount of correction needed in a time series to adjust for the season of the year
Execute
the company executes the plan as the actual demand information becomes available
Dependent demand
the demand that a company controls
Independent demand
the demands of customers are independent demands because that decision in independent of the actions of the company
What is the goal of knowledge between suppliers and customers (B2B)?
the goal is to improve the competitiveness of the entire supply chain, so in some cases two firms operate with knowledge of the other firm's needs -a supplier has demand forecasts and actual orders, and so this info allows manufacturers to know when an order will be needed which reduces dependency on forecasts
Two categories of data capture and monitoring in demand management
the overall market and the detailed product mix
Demand management organization
this is a relatively new organizational form in North America. It can report to either the manufacturing or sales organization and usually is charged with creating forecasts, managing the SIOP process, and influencing both supply (manufacturing, purchasing, inventory, logistics) and demand (sales, marketing, pricing) policies
What is a key requirement for demand management communication with sales and operations planning?
to provide demand forecast information
